New home sales slow, but first-time buyers stay active
Mortgage applications for new home purchases increased in June, driven by a growing demand from first-time buyers.
The Mortgage Bankers Association (MBA) has reported a 0.7% increase in mortgage applications for new home purchases in June compared to the same period last year. However, applications decreased by 16% from May, according to the MBA's Builder Application Survey (BAS) data.
“Applications for new home purchases slowed in June, consistent with broader declines in single-family construction and new building permits as well as typical seasonal patterns,” said Joel Kan, MBA’s vice president and deputy chief economist.
Despite the overall slowdown, the data revealed a growing trend of first-time homebuyers entering the market for newly built homes.
“The average loan size edged lower for the second consecutive month, and the share of FHA applications increased to 28.7%, as first-time buyers continue to account for a growing share of demand for newly built homes,” Kan noted.
The MBA estimates that new single-family home sales were running at a seasonally adjusted annual rate of 626,000 units in June 2024, representing a 10.8% decrease from May's pace of 702,000 units. On an unadjusted basis, an estimated 52,000 new home sales occurred in June, down 17.5% from 63,000 in May.
“MBA’s estimate of new home sales showed a monthly decline to a pace of 626,000 units – the slowest in four months. Mortgage rates dipped below 7% in June, but that did little to spur purchase activity,” Kan said.
The survey also provided insights into the types of loans used for new home purchases. Conventional loans made up 60.8% of loan applications, while FHA loans composed 28.7%, RHS/USDA loans 0.3%, and VA loans 10.2%.
The average loan size for new homes decreased slightly from $400,150 in May to $399,879 in June.
The MBA’s Builder Application Survey monitors application volume from mortgage subsidiaries of home builders across the country. This data, along with other sources, allows MBA to provide early estimates of new home sales volumes at various levels. Official new home sales estimates, conducted monthly by the Census Bureau, record sales at contract signing, which usually aligns with the mortgage application process.
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